Why The S&P 500′s $100 Billion Club Matters; 7% of the companies account for 40% of the S&P 500’s market cap and are responsible for 44% of earnings

April 15, 2014 Leave a comment

Why The S&P 500′s $100 Billion Club Matters

SAM RO MARKETS  MAR. 31, 2014, 8:39 PM

The S&P 500 isn’t driven uniformly by 500 companies.

Because the index is weighted by market capitalization, the bigger companies have a bigger impact on the way it moves.

In a new note to clients, Morgan Stanley’s Adam Parker discusses the $100 billion club: the companies worth more than $100 billion:

There are 35 stocks listed in the US that each have a market capitalization greater than $100 billion. Combined, these stocks are $6.9 trillion of market capitalization today, representing 40% of the S&P 500’s market capitalization and 44% of earnings… The fact is, these 35 names matter deeply for the performance of most benchmarks, and the competitive impact of these companies affects nearly all US companies at some level. For a long time, hedge funds had an anti-mega-cap bias, underweighting these names in favor of stocks less than $100 billion in market capitalization. Is that smart? This $100 billion club is one where historically a sizeable amount of alpha can be generated…

So, 7% of the companies account for 40% of the S&P 500’s market cap and are responsible for 44% of earnings

Below is a list of the biggest S&P 500 companies based on Friday’s close via FinViz.

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Finviz

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FinViz

 

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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